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The power of two

Some business collaborations have become industry folklore; others, it seems, should never have started, as David Craik reports.

17 Jan 2018

Disney and Hewlett-Packard

Disney’s iconic 1940 movie Fantasia is perhaps best remembered for Mickey Mouse and his battles with magic brooms. But it is also a prime example of the benefits of collaboration – not just between classical music and popular culture, but between businesses.

Disney needed an audio oscillator able to measure sound frequencies to help it fine-tune the acoustics of Fantasia in movie theatres, and the model they chose was one developed in a garage by a young Bill Hewlett and David Packard. From that moment of ingenious inspiration and application, Disney and Hewlett-Packard (HP) continued their collaboration.

HP powered Disney’s theme parks over the following decades, and in 2003 they signed a 10-year strategic alliance aimed at further elevating customer experiences in the internet and digital age. This would be achieved through the “collaborative development of new technologies and enhanced entertainment experiences”.

Bob Iger, Disney President and Chief Operating Officer at the time, said: “With Disney’s phenomenal creative content, unparalleled guest experiences and expertise in technological innovation, adding HP to the team strengthens our respective positions as leaders in the world of digital entertainment.” The collaboration continues to this day.

Online B2B matchmaking platform Powerlinx believes successful business collaborations like these can transform companies, disrupt industries and reinvigorate brands. This is achieved, it believes, through pooling knowledge and leveraging the brand and expertise of your partner when entering new market segments or meeting customer needs. It can boost technological development and innovation and make companies agiler when looking to reduce costs or get products to market. It can also make life hotter for your competition.

Starbucks and Barnes & Noble

In 1993, US retail book chain Barnes & Noble teamed up with coffee gurus Starbucks so bookworms could enjoy their Kerouac with a cappuccino and their Marquez with a mocha. Barnes & Noble wanted to improve customer experience and dwell time, and Starbucks wanted to sell more coffee to more affluent people.

Both benefited from the tie-up, which, like Disney and HP, continues today. It also played a part in Barnes & Noble gaining increased market share through the demise of rival Borders. Can a few cups of coffee really make that much difference? Well, Mark Evans, a former executive at Borders, thought so. In 2011, he wrote: “Barnes & Noble secured the exclusive US Starbucks partnership. It was a major branding and traffic-driving win for them.”

Starbucks certainly got a taste for collaboration, also partnering with United Airlines for its logoed coffee to be sold on its flights, with Kraft Foods for its coffee to be marketed in stores, and with Apple to sell music as part of its in-store vibe.

Collaborations can also be more formal and develop their own strategic momentum.

Standard Bank and MTN

South Africa’s Standard Bank set up a joint venture partnership with local mobile phone operator MTN in 2005. It ran a banking service that allowed around 20 million customers to open and access accounts using their mobile handsets. At the time, Irene Charnley, commercial director, MTN Group, said: “This convenient retail environment revolutionises financial-sector marketing and distribution channels, while massively simplifying service access.” It did so well that Standard bought the banking business from MTN.

Sony and Samsung

In 2004 Sony and Samsung created a joint venture called S-LCD, with the aim of delivering “advanced and cost-competitive” LCD panels to both companies. The groups said that the tie-up contributed to the expansion of both their TV businesses and benefited the large LCD market overall. That was until 2011 when Sony paid £600 million to buy out Samsung’s stake in the venture and make it a wholly owned subsidiary. However, they agreed to enter into a new strategic agreement for the supply and purchase of LCD panels and to continue co-operative engineering work on LCD panel technology.

Renault and Nissan

Renault and Nissan are a good example of firms in the same industry employing cross-border collaboration. Since 1999 they have taken stakes in each other’s firms and worked together on product development and corporate strategy. By doing so they have both boosted their global sales figures, become the world’s fourth biggest carmaker and making percent cent of new car sales worldwide. Renault states: “This cross-shareholding arrangement ensures that the two partners have the same interests, and encourages them to adopt win-win strategies beneficial to both.”

But not every partnership is a drive into a golden sunset; there are a fair number of car crashes as well.

AOL and Time Warner

In 2000, internet content distributor AOL and media content group Time Warner announced a US$360 billion combination. What could go wrong with this marriage of the traditional and the internet future? Plenty, it seemed, as the partnership was stymied by culture clashes and a lack of management coherence and strategy. A banker at the time said the combination was like “trying to mate a horse with a dog”. It was driven not by logic but by ego. There was no clear definition or understanding of what the two groups could do for each other.

Huge write-downs, fraud inquiries and the fizzling out of the dotcom boom were the final nails in the coffin. It ended in a demerger in 2009.

There are also the ones that get away. Confectionery giant Mars has cause to regret a brand collaboration opportunity that it failed to gobble up. It turned down an offer from Amblin Productions in 1982, which wanted to create a tie-in between its new film and Mars product M&Ms. Mars said no, and Hershey’s Reese’s Pieces benefited from the movie’s huge success instead. The film? E.T. the Extra-Terrestrial.

Collaboration can be out of this world, it seems – but do your research and develop a strategy and a clear need before you make your move.